Online retailers have been slow to grow in many developing markets, but smartphones are changing the game. In Southeast Asia, a region with a population of 600 million, “m-commerce only” now appears to be a viable strategy, according to one of the region’s top online retailers.

“We see many Southeast Asian consumers making the move to going online via smartphones rather than laptops,” Paulo Campos, CEO of online retailer Zalora Philippines, told the Innovation Group. “Strategically, Zalora is preparing for a potentially ‘mobile-only’ market. The recent and very fast increase in mobile penetration is generating a huge number of ‘thumb-shoppers.’”

This makes sense: the region includes some of the fastest-growing smartphone markets in the world. According to eMarketer, the number of Indonesian smartphone users will grow by 48.4% from 2016 to 2018, a meteoric increase from 69.4 million to 103 million users. This will give the Muslim-majority country the fourth-largest population of smartphone users on the planet. Similarly, the Philippines, the region’s second-largest country by population, will witness growth of 34% by 2018, leading to a total of 39.4 million users.

While these mobile markets are large and growing, businesses continue to suffer from underdeveloped financial infrastructure. “Lack of credit card penetration and, even more, banking penetration creates a huge barrier to e-commerce adoption,” said Campos. In Indonesia, only 36% of the population has an active bank account, or about 91 million people, the World Bank’s Global Findex survey shows, far below Thailand, where banking penetration is a solid 78%. In the Philippines, that penetration is even lower: just 31% of the population.

Overcoming these hurdles requires some creative thinking. “At Zalora, we built a [sales] infrastructure able to accept COD—or cash on delivery—payments from customers nationwide in all of Southeast Asia, making the brands we offer accessible even if you don’t have a bank,” Campos said.

Yet, the COD solution is no panacea. Complex geography is another issue in Southeast Asia, where Indonesia and the Philippines, the region’s two largest countries by population, are also the world’s two largest archipelagos, consisting of thousands of islands that span multiple time zones. In addition, from Malaysia to Vietnam, underdeveloped rail and road infrastructure threatens the viability of any COD payment system.

These challenges have led Zalora to shed operations in some markets in the region. TechCrunch reported earlier this year that Zalora was planning an exit from Thailand and Vietnam in favor of concentrating on more profitable markets.

Zalora hasn’t been the only one to come upon hard times. Japan’s e-commerce giant Rakuten decided to close down its Singapore, Malaysia and Indonesia offices earlier this year. Now the Japanese company is opting to hit the market from a different angle: by launching a consumer-to-consumer mobile app called Rakuma.

Chinese companies have taken a long position on the region. In May 2016, Alibaba announced a $1 billion purchase for majority control of Lazada, a Southeast Asian e-commerce company. Both Lazada and Zalora are backed by Rocket Internet, a German internet investment firm.

The Philippines and Indonesia, by virtue of population, are too profitable for e-commerce businesses to take a pass. In these countries, online retailers will likely ramp up efforts to develop by niche, rather than applying regional one-size-fits-all solutions, Campos said. “Given the region’s diversity, we adapt to what works in the local markets. There is no one-size-fits-all strategy if you’re operating in this region,” he observed.

For more on e-commerce challenges in developing markets, see our Q&A with Joy Aljouny, cofounder and CEO of Dubai-based delivery and logistics startup Fetchr.

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